chapter 6 discussion - over foreign subsidiaries...

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Why might a subsidiary decide to issue new shares of common stock to parties outside the business combination? There are various reasons that can justify the issuance of new shares of common stock to parties outside the business combination. The first reason is that capital is increased; therefore the subsidiary receives more financing. The second reason can be to make the company more valuable and attractive to investors, or maybe good managers. Another reason for the issuance of new shares can also be government regulation. Hoyle states that “a subsidiary could also be legally forced to sell additional shares of its stock. As an example, companies holding control
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Unformatted text preview: over foreign subsidiaries occasionally encounter this problem because of laws in the individual localities. Regulations requiring a certain percentage of local ownership as a prerequisite for operating within a country can mandate issuance fo new shares. Hoyle, J. B., Schaefer, T. F., & Doupnik, T. S. (2011). Advanced Accounting (10 th ed.). NewYork, NY: McGraw-Hill/Irwin. Volkan, A. (n.d.). Accounting for subsidiary stock transactions. Retrieved from
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This note was uploaded on 10/29/2011 for the course ADVANCED A 4110 taught by Professor Fridel during the Spring '11 term at University of Minnesota Duluth.

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